Tax man trying to figure out a way to outsmart Google

If put into place, France would tax tech companies on "personal data" collected.

If a new French government proposal (Google Translate) is implemented, tech companies earning money in France would pay new taxes based on how much personal data is collected from their users. For months now, lawmakers around the world have lambasted financial shenanigans in use by Google, Amazon, Apple, and many other tech companies that employ legal techniques to shift income and drastically minimize their tax burden.

British and French officials have gone after Google in particular. Margaret Hodge, the United Kingdom’s public accounts committee chair, slammed Google’s northern European operations chief last year, saying, "We're not accusing you of being illegal, we are accusing you of being immoral.”

France has floated a proposal that would impose a new tax on the collection of personal data as a way to counter tech companies’ tendency to legally move money around Europe—between Ireland, Bermuda and the Netherlands. Google, for example, despite an estimated $2 billion in ad revenue in France, pays almost no taxes in the country.

Last Friday, a 198-page government report to the French Ministry of the Economy outlined a proposal that, if approved by the French government, would impose a tax on tech companies based on how many users a site like Facebook or Google has, and how much personal information those companies hold.

The report argues that because nearly all of these services are given away for free (or as part of a “freemium” model), that the companies are making huge profits at the expense of personal data, collected for free. The report, however, does not specify specific tax rates, nor how much money this plan would raise.

Still, France’s digital economy minister, Fleur Pellerin, said at a press conference (Google Translate) that the report “gives us a number of ideas and paths,” toward a way to raise more money via tech companies.

“The use of personal data and the income derived from them are part of the paths that we want to look at, but it is not the only path,” she said.

Cyrus Farivar
Cyrus is a Senior Tech Policy Reporter at Ars Technica, and is also a radio producer and author. His latest book, Habeas Data, about the legal cases over the last 50 years that have had an outsized impact on surveillance and privacy law in America, is due out in May 2018 from Melville House. He is based in Oakland, California. Emailcyrus.farivar@arstechnica.com//Twitter@cfarivar

You want to know another way "to raise more money via tech companies"?

Close the loopholes that let them do this. If they spent half as much time standing up to the big business lobbies that oppose tax reforms as they do trying to come up with off-the-wall ways to get around those lobbies, this problem would have been fixed decades ago.

Its worth noting that Margaret Hodge has herself been accused of using legal methods to minimise her personal tax liabilities (family trusts) in her investment in a company (Stemcor) that uses tax optimisation to reduce its tax bill.

You want to know another way "to raise more money via tech companies"?

Close the loopholes that let them do this. If they spent half as much time standing up to the big business lobbies that oppose tax reforms as they do trying to come up with off-the-wall ways to get around those lobbies, this problem would have been fixed decades ago.

French and British politicians aren't trying to reform taxes and ensure a level playing field for all (which would result in businesses that said politicians are "cozy with" taking a tax hit as well); they're trying to go after specific companies they don't like--companies that happen to be foreign--and impose extra taxes on only those companies.

So, it would be very interesting to see how long it would take France to determine how much data residing on Google servers belongs to citizens of France, especially since it took Google years to admit it was scraping WiFi access point data while building Maps.

I find this quite original and I daresay, creative. Obviously, finding out how many French users actually uses those services, whether to tax inactive accounts and so on promises lots of debate and headaches, if this proposal were to even come to pass.

It would also avoid the eternal problem of closing a loophole, only to discover the next year that the company found another one elsewhere.

Its worth noting that Margaret Hodge has herself been accused of using legal methods to minimise her personal tax liabilities (family trusts) in her investment in a company (Stemcor) that uses tax optimisation to reduce its tax bill.

I personally take every tax credit I can possibly get because it's legal and there would be no repercussions if I did. That doesn't mean I believe some of the loopholes should be closed so that the US budget could be balanced and the tax code simplified.

A smoker telling a smoker to quit because it's bad for your health may be hypocrisy, but that doesn't mean that the statement is not correct.

Hypocrisy is rampant in all levels of politics, but hypocrisy is an emotional reaction to statement, not a logical one. There is very little question that these types of loopholes should be closed.

That said, this is only a comment on international loopholes, not a comment on whether this scheme of information taxing is going to work.

Ha! Good luck with taxing information! The first step is determining how much personal info Google is collecting. Not how much they say or how much they are supposed to but how much they actually are grabbing through all the various obvious, admitted, sneaky, immoral, or flat illegal methods.

Also agreed with French tax authorities being full of crap. Fix the tax loopholes and tax all businesses fairly instead of going after specific foreign companies you want more $$ from. (All governments guilty of this though.)

They would also have to put in the EULA that Google does not allow access from France. Don't really need to enforce it except to shut down Google.fr and to not crawl French sites. And they could still do AdSense for French companies, since those companies would be advertising to international users, not French.

I'm confused, and maybe it's just because I'm not a tax lawyer or accountant, but the final quote says, "The use of personal data and the income derived from them are part of the paths that we want to look at, but it is not the only path."

If there is an "income derived" from the use of personal data, isn't that income taxable? I know the US gov't taxes my income, and it taxes the income of corporations.

If Google operates in France in a way that costs the government money (i.e. street repair, police protection, etc), then they should be paying some taxes there, based on the income that portion of the operation earns.

But there must be tax loopholes that allow them to make it look like they don't earn any money at all from being in France. Of course, that can't really be the case, because if it were, they wouldn't still have offices there. It seems like there must be some way to track the money. They have to be paying rent on some offices in France, right? They must be paying salaries to French citizens.

Just follow the money, rather than coming up with these weird, unenforceable, and probably illegal ways of taxing a specific company that is making you look like a fool.

Its worth noting that Margaret Hodge has herself been accused of using legal methods to minimise her personal tax liabilities (family trusts) in her investment in a company (Stemcor) that uses tax optimisation to reduce its tax bill.

It takes a thieve to catch one

It's kinda become a hip thing among European Countries to attack Google via fine grained and precisely aimed laws. I do not approve of that.I approve of the idea to close tax loopholes and make it harder for companies to dodge taxes, especially in ways that are only open to really big corporations. But this always seems like sniping on a specific target just for reasons of publicity. If this law is about collecting personal data and Google is the prime example, this is obviously a PR driven stunt. The one big company living entirely off collecting personal data of its users is Facebook. They don't even offer anything that is not paid this way.

I'd really like to know what is happening behind the scenes in such cases. Is this just a way to persuade Google into closer relations with politics, aka bribery? Is it French protectionism because it's a foreign company? Do they believe this is the good and right way to do?One can just speculate how such laws get created...

Another aspect of this are the implications towards the usage of collected data. In Europe there's generally a slightly different understanding of privacy and who's responsible to take care of it. Imposing taxes on collecting those data basically ends the paradigm of privacy being an important right to everybody and makes it a tradeable good. I'm not sure whether this is a good idea as it would reflect the economic reality or a bad thing as it would open all flood gates...

Governmentopia - where it is immoral to want to keep your own money, but moral to want to take as much of someone else's money as you can get, and you are perfectly justified to get all mad when you cannot take as much as you wish you could.

Hey, I don't think it's because Google is a US company. As far as I know, they, Apple, Facebook and practically every one else also happily practice tax evasion through legal loopholes, so I don't think the line "they want to tax Google because it's an US company" holds much water. They want to tax them because everyone is aware they pay an abnormally low amount of money compared to the amount they actually make. This might be a political ploy to convince the said companies to pay more taxes, because in case you didn't notice it, some local actors might simply not be able to evade taxes so deftly, which de facto distorts competition towards the big players.

The problem I see is, if countries start putting in these kinds of policies, will I as a webmaster have to abide by the laws of each country that my site is accessible in? By default everyone online can access my site, will I have to start blocking visitors from specific countries simply to avoid running foul with laws I don't understand?

This is just a report from the national auditor. The four ministers that asked for the report should now say what do they want to do with if, if they choose to go forward. My feeling is that they are just posturing before the next G20 meeting, where France intends to pursue the project of adding a VAT on digital goods. This gives them a position to back away from, making they seem a bit less out of touch with the digital realities.

The report is funny when it metions that the tax should apply to users, located in France, who do "free work" for the company by inserting themselves in the value chain of the company. If the user is just the product, not doing any work, then companies could avoid this tax. Moreover, making an user answer a CAPTCHA makes them do some "free work", potentially making a much bigger slice of the web vulnerable to this law, which in turn makes it easier for it to be unenforceable. Finally, even big banks would be impacted (as when people go online to check their balance) and probably they will make a fuss out of this.

Personal information has no value unless it's sold. It's sold to advertisers. Advertising income is taxable. Hence, Google should already be getting taxed for the personal information they hold, that is, if France would just fix their tax laws instead of inventing new ones.

What tax filer here has not sought ways to reduce their tax bill? Nothing wrong with that when done honestly. The problem is Google wants to avoid paying taxes while having supported political parties in favor of raising taxes. "We're all equal. Just some of us are more equal."

Good luck getting any tax money from Google. They'll spend $10 for each $1 saved on principle that America isn't a country to support.. well, unless they are using google search, docs, android or other spyware.

By taxing the personal private data they collect, perhaps they'll collect less? that would be a progressive Idea.

and finally, the notion that people's info is being harvested by Facebook and Google without the public's knowledge, could finally be out in the open as the value of that data would be described.

At present, no organization that represents the people of the earth gets data about what precisely Google or Facebook extract from the people who use their Cloud services.

Personal information has no value unless it's sold. It's sold to advertisers. Advertising income is taxable. Hence, Google should already be getting taxed for the personal information they hold, that is, if France would just fix their tax laws instead of inventing new ones.

I agree with your comment, except that it takes all countries to agree. For example, if France shuts its doors, the businesses just follow the path if least resistance - next door in UK or Germany.One poster implied that Google were being singled out because they pay so little tax compared with Apple, IBM, etc ... Let me break it to you - they ALL play the same scam. It focuses the wealth on shareholders, not societies where they conduct business...My final thought here is that this will serve to complicate matters rather than help. It's a form of taxation - and taxation should be kept simple. This will probably increase the no of loopholes, or drive Google offshore anyway. It will also fail to stop very few other scammers, and would create an uneven playing field for the scammers

I understand the logic. It's effectively moving the tax downwards, on to the users. And the users are, more or less, geographically fixed. But, if it's the users who are the focus of the taxation, they'll also be the focus of any scrutiny. It doesn't seem dissimilar to the way airline passenger duty has been implemented. It's one thing for a government to demand access to passenger records, it's something else to demand details of Facebook or Google usage.

If the tax is going to be based on the amount of information or some notional value, and not be a fixed charge per user, what happens in the case of tax disputes? Is a government going to grant itself access to this personal information so it can value it? While this could always be carried out by some neutral third-party auditor, I can't imagine a government giving up the right to carry out investigations directly itself. I can see this being used as a stick.

In 2011, Google make about $2 billion revenue in France and paid less than $7 million of tax (less than $43 million if you include social, offices, ... taxes). It's a 3,2% tax rate on income.For a company that doesn't use loopholes, the max tax rate is 33% in France (35% in US).

Now, as usual with politicians, their proposals are eccentrics and have little chances to be applied, especially under the European Union.

Also, it would be difficult to close these loopholes as they are the result of economic rules created throughout the existence of the European Union. They were put in place to help economic exchange in Europe. The result is, for example, that when a french buys a song on iTunes, it pays a 6% VAT (Luxembourg tax) instead of 20,6%.

Funny ... going after businesses for finding creative ways to avoid paying taxes, but almost every nation in the world embraced a central bank that lords over it with loans that it can use to pressure and manipulate the government with.

British and French officials have gone after Google in particular. Margaret Hodge, the United Kingdom’s public accounts committee chair, slammed Google’s northern European operations chief last year, saying, "We're not accusing you of being illegal, we are accusing you of being immoral.”

Personal information has no value unless it's sold. It's sold to advertisers. Advertising income is taxable. Hence, Google should already be getting taxed for the personal information they hold, that is, if France would just fix their tax laws instead of inventing new ones.

The report argues that because nearly all of these services are given away for free (or as part of a “freemium” model), that the companies are making huge profits at the expense of personal data, collected for free. The report, however, does not specify specific tax rates, nor how much money this plan would raise.

If they really wanted to solve it, they'd try passing laws to allow for transparent and manageable data collection methods. As it stands now, basically using the internet is giving away your personal information for companies to monetize and sell out, with no other option. Govt shouldn't be reinforcing the take first, monetize now, ask/worry about rights later mentality. Taxing personal information isn't the way to go. Especially when you're just looking for a handout.